Regulatory News: IFR/IFD- Investment Firms Categorisation Table

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IFR/IFD: Investment Firms Categorisation Table - Class 2 & 3 Firms

IFR/IFD: Investment Firms Categorisation Table continued - Class 2 & 3

27th January 2020

There are three Categories of Investment Firms under IFR and IFD. These will be Class 1, Class 2 and Class 3. Now that IFR/IFD has been finalised, these Classes and sub-divisions can be determined as summarised.

< Back to Class 1 Investment Firms summary

Class 2 and 3 investment firms

All other investment firms not within Class 1 and authorised under MiFID will be subject to the prudential regime in IFR/IFD and therefore will not be subject to the CRR/CRD regime (except to the extent that they are included in a group subject to consolidated supervision under that regime). These investment firms are divided into two main categories, Class 2 and Class 3 as summarised in the following table:

<PREVIOUS Table: CLASS 1 Investment Firms

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Categories of Investment Firms under IFR and IFD

CLASS 2: Other authorised investment firms meeting any of the following tests:

If:

AUM (assets under management, discretionary and ongoing nondiscretionary advisory) calculated on a combined basis for all investment firms that are part of a group ≥ €1.2bn
Daily COH (client orders handled) calculated on a combined basis for all investment irms that are part of a group ≥ €100m (cash trades) or €1bn (derivatives)
ASA (assets safeguarded and administered) > zero
CHM (client money held) > zero
DTF (daily trading flow) > zero
NPR (net position risk) or CMG (clearing margin given) > zero
TCD (trading counterparty default) > zero
On- and off-balance sheet total (calculated on a combined basis for all investment firms that are part of a group) ≥ €100m
Total revenues from investment services and activities (average of last 2 years) calculated on a combined basis for all investment firms that are part of a group ≥ €30m

Larger or interconnected investment firms (known as Class 2 investment firms) will be subject to more extensive and burdensome requirements under IFR/IFD.

Investment firms will fall into this class if they meet or exceed any of the thresholds specified in IFR, as summarised herein this table.

CLASS 3: All other authorised investment firms:

If:

All Other Investment Firms -i.e. all those that fall below the thresholds of both Class 1 and Class 2 Investment Firms

Those smaller and non-interconnected firms, known as Class 3 investment firms, will be those investment firms that fall below all the thresholds for both Class 1 and Class 2.

These firms will be subject to less extensive requirements under IFR/IFD.

In essence, Class 3 firms are those investment firms that do not conduct investment services that carry a higher risk for clients, markets or themselves and whose size means that they are less likely to cause widespread negative impacts for clients and markets if the risks inherent in their business should materialise or if they fail.